House Narrowly Passes Sweeping Tax Legislation

On May 22, 2025, the U.S. House of Representatives narrowly passed a comprehensive tax and spending bill aligned with President Donald Trump's policy agenda by a 215-214 vote. The legislation includes provisions to extend the 2017 tax cuts, increase military and border enforcement spending, limit green-energy incentives, and tighten eligibility for aid programs. However, the bill is projected to add $3.8 trillion to the national debt over the next decade, raising concerns among fiscal conservatives.

Senate Republicans Plan Significant Changes

Despite the House's approval, Senate Republicans have indicated plans to make substantial modifications to the bill. Key areas of contention include proposed Medicaid cuts, the scale of spending reductions, and the bill's impact on the federal deficit. Some senators, such as Rand Paul and Ron Johnson, oppose the inclusion of a $4 trillion debt ceiling increase, while others, like Josh Hawley, advocate for expanding the child tax credit and closing tax loopholes.

SALT Deduction Cap Expansion Under Scrutiny

One notable provision in the House bill is the proposed expansion of the state and local tax (SALT) deduction cap from $10,000 to $40,000. This change would primarily benefit high-income earners in high-tax states like New York, New Jersey, and California. While this measure has garnered support from some lawmakers, others express concern over its potential to disproportionately favor wealthier taxpayers.

Economic Implications and Market Reactions

The Congressional Budget Office estimates that the House bill would add $3.8 trillion to the federal debt over the next decade, exacerbating concerns about the nation's fiscal trajectory. Following the House vote, global financial markets experienced turbulence, with long-term U.S. Treasury yields reaching their highest levels since 2023. The International Monetary Fund noted that while the U.S. Treasury market remains orderly, the evolving tax plans are being closely monitored due to their potential impact on global economic stability.

Next Steps in the Legislative Process

Senate Republicans, holding a narrow 53-47 majority, plan to use special budget reconciliation rules to pass the bill with a simple majority. However, any changes made by the Senate must be reconciled with the House version before the final legislation can be sent to President Trump for approval. Formal Senate deliberations are expected to commence after the Memorial Day recess, with significant negotiations anticipated in the coming weeks.

Contact: [email protected] | +86 18570358160 | www.zpigments.com